The impact of the war cannot be measured based on headlines alone. While the news may focus on the oil price and currency moves, there is a far more silent effect that is worth discussing; one that will have a far longer impact than the shorter-term pain of higher oil prices.
GLASS
A glass furnace cannot be switched off between shifts. It runs continuously at around 1,500 degrees Celsius, and natural gas accounts for roughly 74% of energy input across European glass manufacturing. O-I Glass, the world’s leading glass manufacturer, with 68 plants across 19 countries, has watched its share price fall by about a third since February. The company walked into the United States (US)-Iran war already carrying a $150 million step-up in European energy costs from expiring long-term gas hedges, meaning it had a sudden increase in operational expenses. While glass rarely features in energy market commentary, this example makes the point that narrow coverage on the oil price ignores the fact that energy prices underpin every input cost, and the impact of these costs is carried through industries and supply chains that most people would never connect to the conflict in the Persian Gulf.
FERTILIZER
Fertilizer is a more direct and more urgent victim to the conflict. Natural gas is the primary feedstock for ammonia, the base compound for most nitrogen fertilizers, and roughly 30% of the world’s fertilizer shipments transit the Strait of Hormuz. Constrained supply and elevated gas prices feed into crop nutrient costs, and those costs take time to clear. The reason being that planting decisions made under limiting high input cost conditions determine food supply months later. The International Energy Agency (IEA) has flagged that the conflict will keep global natural gas supply tight for at least two years, making food-price inflation a medium-term certainty, not simply a near-term risk.
HELIUM
Helium is barely being tracked, yet the Gulf is a meaningful source of global supply. Helium is used in MRI machines, semiconductor manufacturing, and data centre cooling infrastructure. A sustained constraint will not make headlines, but it adds real cost and friction to chip production and medical services at a time when neither can absorb much pressure.
ALUMINIUM
The Gulf’s role in aluminium is consistently underestimated. The region accounts for roughly one sixth of global exports, and supply disruption feeds simultaneously into the automotive, construction, and packaging sectors, which are already navigating elevated input costs from several directions.
PETROCHEMICALS
In addition, petrochemicals, made from oil and gas, are key ingredients for plastics, detergents, synthetic fabrics, adhesives, and pharmaceuticals. When both are expensive and constrained, the cost of goods with no obvious connection to an energy market starts moving. The link between a Hormuz disruption and the manufacturing cost of soap or pharmaceutical packaging is real, even if it takes several months to appear in a margin report.
INDIA’S DILEMMA
India offers one of the cleaner pictures of how a sustained oil shock moves through an entire economy.
The world’s third-largest oil importer has seen its import bill expand sharply as Gulf supply has
tightened. The rupee has fallen to record lows of Rs95.6/$ and is the worst-performing currency in
Asia so far in 2026. The Reserve Bank of India has intervened aggressively, as foreign exchange
reserves have dropped to $690.7 billion, and the central bank has capped banks’ daily open foreign
exchange positions at $100 million. Indian Prime Minister, Narendra Modi, has publicly urged
citizens to stop buying gold, India’s third-largest import category at $72 billion annually, and to cut
overseas travel as the country tries to keep dollars from exiting the country. These are signals of
genuine balance of payments stress.
SOUTH AFRICA’S FOOD PRICES
For South Africa, the agricultural dimension compounds an already stretched picture. Around 98% of
South Africa’s agro-chemicals and 80% of fertilizer and machinery are imported. Higher shipping
costs, a weaker rand, and elevated fertilizer prices represent a simultaneous three-way squeeze on
farming inputs – one that will take several growing seasons to price through to the food basket. The
farmer absorbs it first, but the consumer’s prices follow, although much later and without much
warning.
THE LONG-TERM EFFECT
Coverage of this conflict has primarily focused on crude prices and currency moves. While those
matter, the more durable story is in the industries nobody is watching – glass plants running at a loss,
the fertilizer supply chain tightening and the helium constraint nobody budgeted for. The effects
accumulate across supply chains that were not designed for this, and they reach the end of the chain
long after the original event has stopped making news.
A LOOK AT THE MARKETS
THE WEEK’S KEY THEMES:
• US inflation drives bond yields to highest levels this year
• Wall Street clocks record highs amid tech optimism
• Gold prices under pressure as US rate hike looms
• Greenback on the front foot as inflation data opens the door to rate hikes
BONDS
US Treasury yields have pushed above 4.5% for the first time in a year as hotter April inflation data
reset rate expectations. Wholesale prices rose at their fastest pace since 2022, consumer inflation
recorded its strongest monthly gain since 2023, and softer retail sales have not yet signalled a
meaningful pullback in demand. Markets have fully priced out near-term rate cuts, shifting focus to
whether the Fed may need to tighten again before year-end. Trade and energy developments from the
meeting between Presidents Trump and Xi remains an added watchpoint.
Germany’s 10-year bund yield has eased slightly to 3.07% but remains close to multi-year highs as
elevated energy costs keep inflation concerns in focus. Markets are pricing in a high probability of a
European Central Bank (ECB) move in June, with further tightening still reflected in year-end
expectations. While the US-China summit has improved sentiment around global trade, the lack of
progress on Iran and the continued closure of the Strait of Hormuz are limiting any broader relief.
United Kingdom (UK) gilt yields have edged lower to 5.03%, supported by firmer growth data despite
ongoing political uncertainty. The UK economy grew 0.6% in the first quarter and 1.1% year on year,
with March also surprising to the upside. Bank of England Deputy Governor, Sarah Breeden, signalled
less urgency for further hikes, noting the current conflict may not trigger a repeat of the 2022 inflation
shock. Political developments have nonetheless kept the domestic backdrop unsettled.
South Africa’s 10-year yield has risen to about 8.69% as local political strain and global risk pressures
converged. The Constitutional Court’s ruling on the Phala Phala process has renewed tension within
the Government of National Unity (GNU) and increased pressure on South African President, Cyril
Ramaphosa, ahead of the November local elections. At the same time, higher oil prices and fertiliser
shortages are expected to lift inflation above the South African Reserve Bank’s (SARB’s) 3% target
range, leaving policymakers reluctant to rule out rate hikes at the upcoming meeting.
EQUITIES
US equity futures are steady after Wall Street’s strongest session in weeks, with the S&P 500 and
Nasdaq closing at fresh record highs and the Dow moving back above 50,000. Technology led the
advance, with Cisco jumping on stronger guidance and Nvidia extending gains after Washington
approved additional H200 chip shipments to selected Chinese firms. Broader sentiment was also
supported by constructive headlines from the US-China summit. AI company, Cerebras, added further
momentum in after-hours trade following its market debut.
European equities moved higher, with the STOXX 50 and STOXX 600 supported by improved USChina
trade sentiment and ongoing strength in technology. AI-linked names remained in focus, with
ASML and Infineon posting solid gains as demand-expectations for infrastructure stayed firm.
Industrial technology company, Siemens, also advanced, extending its post-earnings strength and
helping underpin broader regional performance.
The UK’s FTSE 100 edged higher but underperformed continental peers, weighed down by exdividend
effects and renewed political noise. Power utility company, National Grid, gained after
confirming a £70 billion network investment plan, while stock-specific weakness limited the broader
move. Luxury retail brand, Burberry, fell despite stronger sales, and private equity group, 3i, came
under pressure on concerns around Middle East exposure.
South African equities were little changed, with the JSE All Share Index and Top 40 both ending
marginally lower on Thursday. Trading this week has remained uneven as commodity price moves,
rand-hedge positioning, and shifting global risk sentiment pulled the market in different directions.
That has left both indices modestly lower on a week-to-date basis.
COMMODITIES
Brent remains above $106/barrel and is still heading for a weekly gain of more than 5% as the Strait of
Hormuz stays closed and diplomacy shows little progress. The ceasefire remains fragile, with the
blockade still central to negotiations. Supply risks also remain elevated after the IEA warned the oil
market could stay materially undersupplied through October even if flows begin to normalise next
month. Talks between Presidents Trump and Xi added some focus on keeping the route open and
expanding US oil exports to China.
Gold is drifting toward $4,600/ounce and is down about 2% for the week as stronger US inflation data
has pushed rate-cut expectations out of the market. Hotter producer and consumer prices have
revived talks of a possible Fed hike later this year, while the prolonged Hormuz disruption continues
to support broader price pressures. With higher rates and a firmer dollar working against bullion, the
usual supports for gold have weakened further. India’s tighter gold import rules have added to the
near-term pressure.
CURRENCIES
The US Dollar Index is near 99 and set for a solid weekly gain as hotter US inflation has pushed ratecut
hopes further out. Strong April producer and consumer price data have reinforced the view that
the Fed will stay on hold for longer, with some risk of renewed tightening later this year. Tensions
around Taiwan during the US-China talks have added a geopolitical tailwind to the dollar.
The euro is holding near $1.17/€ but has eased from recent highs as energy-related inflation risks keep
the ECB on a hawkish path. Markets continue to price a strong chance of a June hike, with further
tightening still reflected by year-end. ECB governor, Martins Kazaks, has reinforced that stance,
warning that sustained oil-driven inflation may require a firmer policy response.
Sterling has slipped to about $1.34/£, its weakest level in more than a month, as UK political
uncertainty has intensified. That softer tone has been partly offset by firmer economic data, with UK
first quarter GDP rising 0.6% and annual growth reaching 1.1%. Breeden also suggested the current
conflict is unlikely to trigger a repeat of the 2022 inflation shock.
The rand is under pressure, falling to R16.61/$ this morning on news of the formation of an
impeachment committee to investigate President Ramaphosa’s Phala Phala scandal, as well as
increased risk-off sentiment entering the market, following President Xi’s harsh warning to President
Trump over Taiwan.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 16.63
EUR/ZAR: 19.35
GBP/ZAR: 22.23
BRENT CRUDE: $107.45
GOLD: $4,571.65
Written by Citadel Advisory Partner and Citadel Global Managing Director, Bianca Botes.
Sources: Al Jazeera, Bloomberg, CBS News, CNN Business, EIA, Farmers Weekly South Africa,
IBISWorld, IEA, Reserve Bank of India, O-I Glass and World Economic Forum.
